Currently, insurance carriers reimburse providers and suppliers of health care or medical services and products based on contracts established between the insurance carrier and the provider/supplier. Today's standard contracts do not permit the providers/suppliers to dynamically change their prices in a way that changes the reimbursement they receive from the insurance carrier. Today providers and suppliers cannot translate differentiation in service, quality or selection into variable reimbursement from insurance carriers because reimbursement is locked in for extended periods and the contracts forbid providers and suppliers from billing the customer of the insurance carrier for more beyond what is agreed to in the contract with the insurance carrier.
Furthermore, currently no method exists for a consumer to determine immediately his out-of-pocket expenses for a range of healthcare products and services across a range of providers and suppliers. Instead, a claim must first be adjudicated, reconciled against the consumers benefits plan, out of pocket maximum, and deductible. Nor can insured customers compare healthcare products and services and judge them based on their individual out of pocket expenses that integrates insured and non-insured payment streams. Likewise, today no method exists for providers and suppliers to change their reimbursement rate for covered services immediately and allow customers to see those changes in terms of their out-of-pocket obligations.
Further still, conventional employee-funded healthcare spending accounts which use pre-tax employee funds in compliance with US law and applicable Internal Revenue Service regulations, commonly known as Flexible Spending Accounts (FSA), fall short of being a truly effective and economically sound vehicle for handling qualified medical expenses (QME) as defined in section 213 of the Internal Revenue code. They do not permit plan participants to act as normal consumers. Instead FSA rules force the participant to predict exactly his healthcare expenses for a 12-month period and punishes the participant, through the use-it-or-loose-it rule, for spending less than predicted so the incentive is to spend all the money before the end of the year. Budgeting too little also hurts the participant, since he/she can no longer gain tax-advantaged payment for qualified medical expenses which exceed the budgeted FSA amount. Moreover, there's a perceived “overcomplexity” of management: the current accounts do not provide for employer or employee a simple method of managing healthcare expenses.
Thus today, employers are searching for new benefits solutions that help attract and retain employees while also controlling healthcare expenses. The current generation of health spending accounts fails to meet these expectations for these aforementioned reasons.